As family farm owners consider the idea of succession planning and passing down the family farm, it is helpful to understand that succession planning is really a subset of strategic, or long-term, planning. One result of strategic planning is for you and your business to develop a sustainable competitive advantage. What is it that sets you apart from your competitors and will allow your family business to achieve long-term above-average performance so that your business can survive and thrive into future generations?

After years in business, there is no doubt you have witnessed neighboring family farms achieve drastically different results. They have similar acreage, location, weather, crops, experience, etc. – almost identical operations. Yet, somehow one business has harmonious relationships with employees, vendors, on-farm family members, off-farm family members and even…the in-laws…and it achieves above average financial performance year after year. Meanwhile, the other farm struggles with poor relationships, seems to have one misadventure after another, isn’t very profitable and either sells the farm or loses it to the bank. What gives?

Management!

While this seems obvious, the combined decisions that you and your team make over years and years and years, make the difference in the overall performance of your family farm.

Better Decisions = Better Results. Well duh!

Not every decision you make can be the correct one. As a business owner, future owner or member of senior management, your goal should be to increase your chances of making better decisions. Tools, processes, systems and structure can help you identify the key strategies for improving your decision-making skills, your management effectiveness and ultimately, the long-term performance of your family business. Generally speaking, better decisions come about from having better information. Better information is more accurate information. Accurate information comes from well-designed data collection practices. Communication, discussion and analysis of this data provides you feedback for your past decisions. Years of feedback is called wisdom. A routine, systematic way of collecting information, sharing it, making decisions, getting feedback and evaluating past decisions is called a management system. A systematic approach to management decisions improves the long-term sustainability of your business.

The Definition of a System:

Sys-tem. Noun \ˈsis-təm\
: a group of related parts that move or work together
: a regularly interacting or interdependent group of items forming a unified whole
: a coordinated body of methods or a scheme or plan of procedure, an organizational scheme
: any formulated, regular, or special method or plan of procedure

At first glance that definition sure that sounds like gobbely-gook. A management system can more easily be described as an organized approach to business to help ensure effective relationships, performance and long-term viability. Believe it or not, every family farm does not have an organized and systematic approach to business management

This is the soft, warm, fuzzy, hard to see immediate results side of business ownership and farm management. Normally, you see immediate results from your actions. You plant seeds and a few weeks later, they sprout. What I’m talking about here doesn’t provide immediate, positive feedback. If often takes months to see gradual improvements and years to see significant improvements. But what the heck, you have some time before you or dad retire…so time is on your side to improve your business and the odds for its ability to provide consistent, above-average financial returns and good memories for generations.

You won't see immediate results of planting the seeds of a farm management system, but your efforts might produce a mighty oak tree to last for generations.

I am going to spend the next several weeks exploring components of a management system, how to gather information, how to keep it current and what to do with the information once you have it. Is it time consuming? Yes. Is it frustrating? Yes. Is it going to be some of the hardest work you have done before? Yes. Is doing something different to help ensure your family farm not only survives, but thrives, worth the effort? Heck Yes! Remember the famous definition of insanity is doing the same things over and over again and expecting different results. By building a solid foundation first, a structure has a better chance of surviving inclement weather and disaster and the mistakes that always seem to happen at the worst time. The same for your business -- it needs a solid foundation on which to build, grow, develop and fine-tune for increased chances of long-term success. Some of the areas we will explore together to develop a farm management system for you begin with the foundation and are fine-tuned from there with each moving part. These farm management system areas include:

Vision, Mission and Core Philosophies

Roles, Responsibilities, Decision-Making Authority

Historical Financial Performance and Analysis

Standard Operating Procedures

Communication Platform, Code of Conduct and Conflict Resolution

Management Controls & Accountability

Long-Term Planning & Direction

Off-Farm Family and In-Laws

Putting It Into Action and Maintaining Proper Direction

Of course, not everything will be applicable to your situation. As a leader in your business, it may be time for you to develop an entire management system, solve a specific challenge or perform a major renovation on your existing management system. I hope this information helps you, your family and your family business.